South Dakota
House committee squashes half-century tax break for SD data centers
PIERRE — Controversial data centers built in South Dakota won’t get a sales tax break—at least not yet.
The House State Affairs committee met Feb. 4 to weigh House Bill 1005, a bill which would have given owners and operators of qualifying data centers exemptions on the state’s sales and use tax for investments made in computer software and “enterprise information technology equipment”—a wide array of computer hardware, servers, power infrastructure, maintenance and security systems.
The exemption would apply to data centers that are issued a building permit between July 1 and June 30, 2036.
Data centers are physical facilities that house servers and networking equipment, which are typically used to store, manage, process and distribute large amounts of data.
Some of the common types of modern data centers include:
- AI data centers, which are specifically designed to support artificial intelligence applications;
- Colocation data centers, where third-parties manage the servers and components;
- Cloud data centers, where major providers, like AMS, Microsoft and Google, host cloud-based data and applications; and
- Enterprise data centers, which are often used for private uses by corporations.
Particularly large data centers are sometimes known as “hyperscalers.” These facilities can cost hundreds of millions to billions of dollars and require hundreds of acres of land to build, with construction at-times occurring in multi-year phases.
The legislation would have required businesses to submit documentation to the secretary of the state Department of Revenue, who would determine if the data center’s eligibility for the tax exemption.
A data center would have been able to receive the break if it could prove the facility’s electrical demands were under a written agreement or rate schedule that avoids shifting electrical costs to other consumers; and notice was given to local water providers that the site’s water consumption was “compatible for the location,” per the bill’s language. Data center owners would have also had to file an annual affidavit that discloses whether the business continues to meet the eligibility criteria.
However, those documents would have been considered confidential under the proposed legislation.
The bill was rejected by the committee, with nine members voting for and three against the legislation. Sioux Falls Republican Bethany Soye was excused from the vote.
Supporters of the legislation told committee members the sales tax break was essential to give data center investors and developers enough incentive to build in the Mount Rushmore state.
State Rep. Kent Roe, R-Hayti, who drafted the legislation, urged the committee to green-light the tax break on the premise that the state would reap a bounty of benefits—from “immense” property tax revenue and the creation of new high-quality jobs, to diversifying the state’s economic makeup.
Roe said other states have already legislated or otherwise implemented sales tax exclusions, and South Dakota needs a similar policy to remain competitive.
“We tax this technology higher than most,” Roe said. “That’s the truth. President Trump has stressed America’s need to lead. Our senators and congressmen highlight AI’s role in health care and national security. This is a national concern.”
Data center lobby uses well-worn revenue pitch
Steve DelBianco, president of NetChoice, a D.C. e-commerce trade group, threw out big numbers to buoy the benefits argument. Over the next 10 years, he projected $333 milllion of new property tax revenue to South Dakota from data centers alone.
For Jay Grabow, chair of the Deuel County Commission, the existential crisis his area faces is real. In 1920, per historical U.S. Census publications, Deuel County once called 8,759 people local inhabitants. Fast-forward to 2024, the county’s population has more-than-halved to 4,335, according to the U.S. Census Bureau.
Some of that Grabow attributes to the farming industry becoming more efficient over time—driving people per acre down—and the loss of at least one 200-employee business.
That means increased taxes over a smaller taxable population, Grabow said. And it also means Dallas-based Applied Digital, which is proposing a 430 megawatt AI data center east of Toronto, South Dakota, is, in the commissioner’s eyes, a means to lowering property taxes.
“We’re merely trying to keep what we had, merely trying to figure out a better way to do property taxes than to burden it on the people,” Grabow said. “If we can spread that across a $400 million billing, we have $1.1 billion of assets today. That’s a nearly-40% increase on our assets that we can spread those taxes across. That’s a 10 to 15% property tax [cut] across the board for those people.”
The economic windfall arguments resembled the debate over carbon pipelines over the last several years, when pipeline companies and some analysts projected an Iowa company’s transmission line could generate billions in the state and lower local taxes, as seen in previous Argus Leader reporting.
DelBianco said businesses and governments have increased their use of the cloud in recent years. The tech industry is tasked with building 50 data centers a year to keep up with U.S. demand, he added.
But the supply can’t be met if South Dakota doesn’t give developers and businesses a big-enough carrot to offset the significant capital investments they would make, DelBianco said.
Nick Phillips, executive vice-president for external affairs of Digital Applied, said South Dakota has been “unintentionally tax[ing] itself out of this market” under the current tax policy.
“The siting decision is binary,” Phillips said. “A project is built here or it is built somewhere else … Other states are capturing the investment, the jobs, and the long-term tax base.”
“The truth is that it’s just fiscally irresponsible to spend a billion dollars on a data center and have the equipment [that] goes in there, be subject to sales tax, when a billion dollar manufacturing, agricultural, another facility doesn’t pay sales tax on its equipment,” DelBianco added . “There are 40 states that exempt the equipment, so we have to pick the states that welcome through that policy.”
Data center opposition says tech threatens South Dakota’s largest industry
But opponents viewed the Big Tech push as an infringement upon South Dakota’s already No. 1 industry: agriculture.
Michelle Oftedahl, a Toronto, South Dakota, farm owner who lives a few miles away from Applied Digital’s proposed data center, spoke to the “unintended consequences” of boosting data centers. Farmland often out-prices what young farmers can afford to break into the ag industry, Oftedahl said, but it’s not too much for corporations with billions of dollars to spare.
Incentivizing data centers, the fifth-generation farmer added, would give rise to companies “buy[ing] land up cheap, knowing that they can cash in on possible future expansion projects, such as power plants, substations, and transmission lines, things that are needed to support the high amount of energy production required.”
“Encouraging large-scale economic development like data centers risks discouraging many young people from choosing agriculture for their future,” Oftedahl said. “This isn’t simply a vote about a sales tax exemption. It’s a statement about our values. Is South Dakota still first and foremost an ag state, or is large industrial economic [sic] now more important?”
Sara Steever, a retired Lennox resident who formerly led Sioux Falls agri-marketing agency Paulsen, questioned whether companies “worth billions and trillions of dollars” needed the tax breaks.
“Turns out that the fact that we can provide access to the megawatts of energy that is needed is tremendously valu[able],” Steever said as a remote testifier. “These companies don’t need tax breaks. They need connectivity, which we already have.”
Dakota Rural Action Lobbyist Melissa McCauley said the bill would lead to a “huge miss on revenue” for the state, given what she perceived as the broad nature of the proposed exemption.
“We are concerned that nearly everything needed to outfit the data center down to its door locks, security cameras, and even the cost of laying the fiber to the center would be exempt,” McCauley said. She asked openly whether a fiscal note should be added to the bill.
Tax break eligibility would not be public record under Roe bill
The stipulation that a data center’s eligibility documents would not be public record rankled opponents—some lawmakers, too.
Austin Adee, a Deuel County resident, said that section of the bill would create an “NDA-shielded secret court.” House Speaker Jon Hansen, who is running for South Dakota governor in 2026, raked the measure over this.
“This particular measure lacks transparency,” said House Speaker Jon Hansen. “The information goes to the secretary of the Department of Revenue, who can unilaterally decide without real qualification whether or not there’s going to be a tax break or not, whether or not rates are going to pass on, whether rate increases are going to pass on to consumers, and the people aren’t entitled to see any of the documentation that supports that decision. I think that’s wrong.”
The bill split the few Democrats on the committee, with Rosebud State Rep. Eric Emery supporting the legislation and House Minority Leader Erin Healy, of Sioux Falls, against it.
Emery asked Roe if the initiative behind the data center push included any guarantees that they would bring the promised jobs and wage-growth, to which Roe responded, “there’s no guarantees.”
Roe expounded upon this later, though, by pointing to the property tax revenue Applied Digital would likely bring to Deuel County—”north of $5 million” per annum, the Hayti lawmaker said, which is close to half of the county’s total budget.
At one point, Emery made a motion to send HB 1005 to the floor without a recommendation from the committee. Assistant Majority Leader of the House Marty Overweg spurned the idea, calling it “bad committee policy.” The motion died on a 5–7 vote.
Healy noted the day’s hearing lacked testimony from Sioux Falls stakeholders, despite a surge of public input in the city.
“I do believe that there is potential economic impact for data centers, but I also believe that economic development should never move faster than public input and transparency and also accountability,” Healy said.
House members will likely have to take up the debate once more during the 101st Legislative Session, as State Sen. Casey Crabtree, a Madison Republican who works for an area energy provider, filed a similar bill in the hours after the committee’s Feb. 4 decision.
The new legislation, a self-titled “Data Center Bill of Rights for Citizens”—akin to Crabtree’s 2024 “Landowner Bill of Rights,” which offered concessions to carbon pipeline opponents in order to ease pipeline development in South Dakota—also intends to exempt data centers from paying a sales and use tax for purchases made in developing a site, while also clarifying regulatory authority and preventing electric rate shifts onto consumers.
Crabtree’s bill does not provide an end-date on the sales and use tax exemption.
(SOUTH DAKOTA SEARCHLIGHT) – Democrats are running for 46 of South Dakota’s 105 legislative seats — leaving 56% of seats without a Democratic candidate.
That doesn’t bode well for the party ahead of November, said Michael Card, professor emeritus of political science at the University of South Dakota.
“It doesn’t put them in a position to actually put forward their ideological policy preferences and have much of a success at getting those enacted,” Card said.
In the state Senate alone, Democrats have failed to field a candidate for 22 seats, which is nearly two-thirds of the chamber. In the House, Democrats have failed to field a candidate for 38 seats, which is 54% of the chamber.
There is only one Democratic legislative primary in the state: a state Senate race in District 26, which includes the Rosebud Reservation.
There are no statewide Democratic primaries, after announced candidates for governor and U.S. House dropped out or failed to gather enough petition signatures to make the ballot, leaving one Democrat in each of those races.
Statewide candidates will have less name recognition than Republican candidates ahead of the general election, since they didn’t have primaries, Card said. In the Legislature, Card said Democrats “are guaranteeing they won’t get a majority.”
In contrast, Republicans have primary races for governor, U.S. House and U.S. Senate. Five legislative districts do not have Republican primaries, but do have Republican candidates. There is a Republican candidate running for every legislative seat, except for one House seat in District 27, which includes the Pine Ridge Reservation.
Card said there are several factors leading to poor candidate turnout among Democrats, including a self-fulfilling cycle of failure.
“A lack of winning makes fewer people willing to take a chance on running for office,” Card said. “Why run if I think I’m going to lose?”
Democrats haven’t held a statewide office since 2015, and they haven’t held a majority of either legislative chamber since 1994.
Joe Zweifel, deputy executive director of the South Dakota Democratic Party, said the organization worked “really, really hard” to convince Democrats to run for office.
“But you can’t force people to run for office,” said Zweifel, of Sioux Falls, who’s running for a legislative seat himself in District 12.
He’s heard the open seats called a “failure.” But he disagrees, choosing to focus on the Democrats who did step forward.
“We’re running quality, good candidates in those races,” Zweifel said.
The South Dakota Democratic Party hopes to build on legislative successes, such as a new law from Rep. Kadyn Wittman, D-Sioux Falls, that commits state funding to cover the family portion of reduced-price school meals.
“That specifically is a return on investment for our donors, and it shows that Democrats are doing good things for the people of South Dakota,” Zweifel said.
Wittman’s success helped inspire Democratic District 13 House of Representatives candidate Ali Rae Horsted, of Sioux Falls, to take a second run at the Legislature. Horsted ran unsuccessfully for the Senate against Sen. Sue Peterson in 2024, garnering 42% of the vote.
Horsted plans to build on that success and the name recognition she already has in the district. She hopes she’ll have “better odds” in this election, since there are two House seats for every district.
Horsted said it would better serve South Dakota if the state had a more balanced Legislature. While the latest Legislature was 92% Republican, 52% of voters in South Dakota are Republican. South Dakota has the lowest percentage of Democrats, 7.6%, in the Legislature nationwide.
“I think it’s important that people have options on the ballot,” Horsted said, “and people are able to vote for candidates that represent their values and their vision for the future of South Dakota.”
Makenzie Huber is a lifelong South Dakotan who regularly reports on the intersection of politics and policy with health, education, social services and Indigenous affairs. Her work with South Dakota Searchlight earned her the title of South Dakota’s Outstanding Young Journalist in 2024, and she was a 2024 finalist for the national Livingston Awards.
South Dakota Searchlight is part of States Newsroom, the nation’s largest state-focused nonprofit news organization.
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From East River to West River, South Dakota communities share a common goal: creating places where people of all ages can live, work and thrive. AARP’s Domains of Livability provide a framework to help communities do just that. Through the AARP Community Challenge grant program—designed to spark quick, impactful local projects—South Dakota communities are turning big ideas into visible, people-centered improvements.
Read the South Dakota Community Challenge Grant Report, which showcases grant-funded projects across the state designed to build more livable communities.
What Are AARP’s Domains of Livability?
AARP’s approach to livable communities is rooted in eight interconnected domains that together support quality of life at every age:
- Outdoor Spaces and Buildings – Safe, accessible parks, streets and public buildings
- Transportation – Affordable, accessible options for getting around
- Housing – A range of choices that support independence
- Social Participation – Opportunities to connect, learn and have fun
- Respect and Social Inclusion – Communities that value people of all backgrounds and ages
- Civic Participation and Employment – Meaningful ways to engage and contribute
- Communication and Information – Clear, accessible ways to stay informed
- Community Support and Health Services – Access to services that support well-being
These domains work best when addressed together—something South Dakota communities are embracing.
Turning Vision into Action with Community Challenge Grants
AARP Community Challenge grants fund short-term, “quick-action” projects that can ignite long-term change. Across South Dakota, these grants have helped communities pilot ideas, build momentum and demonstrate what’s possible when residents put people first.
Here’s how local projects are bringing the Domains of Livability to life:
- Outdoor Spaces and Buildings: Communities have used grants to enhance parks, create pop-up public spaces, add benches and shade and install wayfinding signs. These improvements invite people to linger, gather, and enjoy shared spaces—supporting both physical activity and social connection.
- Transportation: Small, thoughtful transportation projects can make a big difference. Community Challenge grants have supported safer crossings, improved walkability and bikeability around key destinations and the planning or installation of transit amenities like shelters and seating—especially important for older adults and people with mobility challenges.
- Housing and Community Support: Some projects focus on helping residents age in place by improving access to information about home modification resources or by testing neighborhood-level solutions that connect people to services. These efforts strengthen independence and peace of mind.
- Social Participation and Inclusion: Murals, community events and creative placemaking projects funded by AARP grants have sparked community pride and social connection. By involving residents in design and implementation, these projects foster respect, inclusion and a strong sense of belonging across generations.
- Communication, Civic Participation and Opportunity: From hosting community conversations to creating new tools for sharing local information, South Dakota communities are using grants to engage residents in shaping their future. These efforts elevate local voices and encourage ongoing civic participation.
Vermillion is a college town built around a historic Main Street with an urban feel. With the University of South Dakota just about a mile away, the stretch stands apart for its youthful energy and academic culture. Best explored on foot, Main Street pairs 19th-century brick storefronts with stops like Café Brulé and the nostalgic Coyote Twin Theater. Murals and sculptures add pops of color to the town center, including works from Mural on the Wall and the Mirrored Medicine Wheel. Below are some of the downtown’s best highlights.
Walkable, Accessible, And Student-Friendly
Since most of downtown Vermillion is centered on Main Street, the district is compact and pleasant to stroll. Better yet, walking here from the University of South Dakota only takes about 20 minutes, making it accessible for students without cars. In recent years, the Vermillion Downtown Streetscape project has also enhanced pedestrian accessibility and safety. By implementing ramps, wider sidewalks, and well-placed crosswalks, navigating downtown Vermillion is easier and safer than ever.
Parking In Downtown Vermillion
Alongside its pedestrian-friendly improvements, the Vermillion Downtown Streetscape project made sure to maintain ample parking. Main Street and the first blocks along its north and south side streets offer plenty of free parking for locals and visitors alike. Removing the hassle of parking meters, you can explore downtown Vermillion without stressful time constraints.
Charming Architecture
With many buildings built between 1880 and 1942, history cements downtown Vermillion. Main Street stands out for its historic facades, where brick storefronts tell a story. After a fire destroyed much of the street in the late 19th century, a town ordinance banned wood-frame buildings from the district, explaining the streetscape we see today.
Some main street structures predate the infamous fire, like the present-day Dakota Brick House restaurant. Other brick landmarks were rebuilt in accordance with the ordinance, like the Classical Revival-style Clay County Courthouse, constructed between 1912 and 1913. Coupled with old-fashioned lampposts and weave-patterned pavement inspired by Main Street’s brick buildings, downtown Vermillion is a living time capsule.
Cool Cafes And Shops
Like all the best college towns, Vermillion is fueled by caffeine, a cafe-culture haven. Main Street W houses cozy places like Café Brulé, which specializes in “comfort food, decadent desserts, and espresso coffee drinks with classic hospitality.” A few doors down, The Bean Community Coffeehouse is a favored spot for students, serving everything from sweet cream cold brews to Italian cream sodas.
If you grab a to-go order, shopping is a great follow-up. The stores in downtown Vermillion reflect its diverse population, with something for every budget and vibe. Cash-strapped students and retro enthusiasts are drawn to spots like the Civic Council Thrift Store, but you can also find clothing boutiques like Blue Monarch. For your next read or a new board game, Outside of a Dog Books & Games is another cute and welcoming store to hunt for a souvenir.
Public Art
As you continue strolling downtown, Vermillion’s award-winning outdoor art is impossible to miss. Since 2017, the Vermillion Community Mural Project (now Mural On the Wall) has decked out downtown with colorful and meaningful installations. The massive artworks depict Indigenous themes, elements of local culture, and messages of inclusion, including the “It Gets Better: Vermillion Pride” installation outside Café Brulé.
Vermillion is also known for its SculptureWalk, installed by the Vermillion Cultural Association. Much like the downtown murals, these 6 sculptures breathe life into the district, depicting themes like resilience and family, along with Indigenous culture. The Mirrored Medicine Wheel is a striking example, situated at the corner of Main Street and Elm. Bear in mind, 2026 marks a rotation for the Sculpture Walk, meaning locals and visitors can expect to see a new set of sculptures sometime in the spring.
Dining, Entertainment, And Nightlife
In the evening, downtown Vermillion sees no signs of slowing down. Foodies flock to Cee Cee’s 605 Scratch Kitchen & Bar for happy hour cocktails and made-from-scratch dishes, while Native-owned Dez From The Rez serves cultural comfort foods with a modern twist. Afterward, Main Street’s Coyote Twin Theater is a great follow-up for new film releases and freshly popped popcorn.
Once night falls, Vermillion’s bar scene keeps downtown alive. On Main Street, Carey’s Bar has served locals and students since 1954. Nearby, the Main Street Pub is favored for its classic bar bites, while XIX (19) Brewing Company specializes in good beer, good company, and themed trivia nights.
Explore Towns Near Vermillion
There are countless cool towns to explore near Vermillion if you want to keep the good times rolling. 30 minutes southeast, North Sioux City offers an eclectic range of entertainment. During the day, visitors can enjoy NASCAR races at the Park Jefferson Speedway. Later, evening calls for gaming on “The Strip,” a two-block gambling district with spots like Beano & Sherry’s Casinos.
For outdoor fun, the town of Beresford is a gateway to Union Grove State Park. A 20-minute drive from Vermillion, Union Grove is home to serene tree-studded hillsides, making it a popular place to picnic, hike, or spend a night under the stars. Alternatively, 30 minutes west of Vermillion, Yankton is a blend of both towns. At Riverside Park, visitors can stroll, fish, and picnic along the Missouri River. Further inland, Broadway Ave is dotted with casinos like the South Point Gaming Lounge.
A Day In Downtown Vermillion
While it’s helpful to have an itinerary, exploring downtown Vermillion can be even better with a bit of curiosity and spontaneity. Tucked in between its top bars, murals, and cafes, you could find a hidden hangout locals love or a piece of public art not detailed online. That being said, Vermillion’s top-frequented restaurants and shops are popular for good reason, so don’t be afraid to follow the crowds. No matter where you start, go, and end, this South Dakota downtown is an absolute joy to walk through.
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